An ensuing buying binge brought both the Dow and Nasdaq Composite above the flat line before a sell-off in the final 90 minutes of trading.

When the closing bell sounded, the Dow Jones Industrial Average
DJIA, -0.75%
was off 11.33 points, or 0.1 percent, to 9,791.72, and the Nasdaq Composite Index
$COMPQ
added 11.04 points, or 0.6 percent, to finish at 1,950.14. The indexes fell to 9,730.38 and 1,930.28 at their respective lows for the day.

Michael Sheldon, chief market strategist with Spencer Clarke LLC, said the market was overdue for some profit-taking from a technical standpoint, and he noted the selling was limited to certain names and sectors. Looking ahead, Sheldon took heart in the news about manufacturing.

"Given the strong Philly number and similar news about New York on Wednesday, evidence is building that the manufacturing sector is starting to strengthen," he said.

"With factory activity on an upswing, the next thing investors will be looking for is job creation," Sheldon added. "We already know consumer spending is improving so a sustained pickup in manufacturing would bode well for economic growth and corporate profits as we head into the end of this year and the beginning of 2004."

The early economic data found jobless claims at an eight-month low, consumer prices remaining stable, business inventories showing the biggest drop in stockpiles in nearly two years and U.S. factory output ticking higher.

Breadth in the Dow stayed extremely positive with 24 of the blue chip index's 30 components moving higher. Caterpillar and IBM were the main drags, losing 5 percent and 4 percent, respectively. Top gainers in the index were AT&T, Eastman Kodak, Honeywell, and SBC Communications. Seven components reached new 52-week highs.

The tech sector was spooked, though, by growth concerns. IBM shares slumped after the company matched Wall Street's earnings view for the third quarter, but Big Blue missed revenue expectations for the period. See full story.

Nokia, the world's largest cell-phone maker, forecast lower earnings in the fourth quarter on flat sales, and continued pressure on handset prices due to increased competition. The stock fell more than 3 percent. See full story.

Peoria, Ill.-based Caterpillar
CAT, -2.55%
only missed Wall Street per-share earnings estimates by a penny but there was widespread anticipation of a blowout quarter from the maker of heavy industrial equipment on Wall Street, as evidenced by the 15 percent run-up in the shares since the start of October.

To make matters worse, Caterpillar said it's comfortable with a forecast for a profit of $3 in the full year. This outlook is above its prior projections but below the average estimate of analysts polled by Thomson First Call for earnings of $3.15 per share. See full story.

Reports Thursday morning from other Dow components were positive with Altria, United Technologies and Coca-Cola coming in ahead of views, and Honeywell meeting expectations.

Volume totaled 1.37 billion on the NYSE, and 1.73 billion on the Nasdaq. Breadth was good on the exchanges with advancers running ahead of decliners, 19 to 13 on the Big Board, and 18 to 13 on the Nasdaq.

The major equity indexes have rallied mightily in October. The Dow has added more than 500 points since the beginning of the month, and it hit a new 16-month high of 9,850.01 earlier in Wednesday's session. The Nasdaq Composite, up more than 150 points in October, was nearing the 2,000 mark for the first time since January 2002.

Philly Fed news inspires buyers; key mortgage rate above 6%

The pickup at midday came as the Federal Reserve Bank of Philadelphia said that factory activity "improved notably" in the Philadelphia region in October.

The area's business activity index rose to 28.0 in October from 14.6 in September, well ahead of the 15.8 expected. Positive readings indicate a majority of firms in the region said conditions were improving. See full story.

On Wednesday, the Federal Reserve Bank of New York said its Empire State Index, a measure of business conditions at manufacturers in the New York region, rose to 33.7 in October from September's 18.4. Economists were actually looking for a small decline in the index.

Also, the number of Americans seeking state unemployment benefits has fallen to a new eight-month low, the Labor Department said Thursday. The seasonally adjusted four-week average of initial claims fell by 4,250 to 390,750 in the week ending Oct. 11, the lowest since early February.

The decline was roughly in line with the consensus forecast of Wall Street economists, who had expected the four-week moving average to fall to 390,000. See full story.

U.S. consumer prices rose 0.3 percent, while the core rate, excluding the volatile food and energy costs, rose 0.1 percent, according to the Labor Department. Wall Street economists were looking for the overall CPI to rise 0.3 percent and the core rate to rise 0.2 percent. See full story.

Business inventories fell 0.4 percent in August. The inventory-to-sales ratio, considered a good but imperfect gauge of the level of unwanted inventories, stayed at a record low 1.36. See full story.

U.S. factory output got a lift from motor vehicle production, gaining 0.7 percent in September -- the best monthly gain since April 2000. See full story.

The U.S. dollar forfeited early gains as investors tested the resolve of officials to let the greenback depreciate. See full story.

For their part, short-term Treasurys turned lower and the benchmark 10-year note trimmed its gain after the Philly Fed news. See full story.

The Energy Department reported a 3.8 million-barrel rise in crude stocks to total 290 million barrels for the week ended Oct. 10. Many analysts were looking for a climb of between 1 million and 3 million barrels. On the New York Mercantile Exchange, November crude slid 23 cents at $31.54 a barrel.

Also, the American Petroleum Institute said crude inventories for the week ended Oct. 10 rose by 7 million barrels to total 297.2 million barrels. See full story.

Meanwhile, gold got a lift in early trades as investors assessed the data and the dollar's drop. See full story.

In addition, the benchmark 30-year, fixed-rate mortgage climbed to 6.05 percent in the week ending Oct. 17, its first move above the 6-percent mark in four weeks, Freddie Mac said Thursday.

The national average on the 15-year loan, a popular refinancing choice, rose to 5.36 percent from 5.26 percent a week earlier, the mortgage agency said.

One-sixth of Dow reports before bell

Five Dow components came in with their quarterly results Thursday morning, joining IBM's report after Wednesday's closing bell to give investors plenty of numbers to crunch.

Altria Group
MO, -0.40%
dipped slightly after the company reported third-quarter earnings of $1.22, a penny ahead of expectations but below the EPS of $2.06 for the same period a year ago. The decrease in net earnings of almost 43 percent, or $2.5 billion, was due primarily to the after-tax impact last year of the Miller Brewing sale for $1.7 billion or 81 cents per share.

Fulfilling the promise of an upgrade from J.P Morgan on Wednesday, Coca-Cola
KO, -0.02%
posted third-quarter earnings of $1.223 billion, or 50 cents a share, against $1.091 billion, or 44 cents a share, a year ago, buoyed by strong international sales, notably in Europe. Excluding charges related to streamlining of operations and an asset write-down, the company earned 55 cents per share in the quarter, besting Wall St.'s consensus view by 3 cents. The stock lost a dime.

Honeywell
HON, -0.99%
rallied to a new 52-week high after the company reported third-quarter net income of $344 million, or 40 cents a share, down from 50 cents a share in the year-earlier period, due primarily to higher pension expenses, but in line with Wall Street's view

Shares of United Technologies
UTX, -0.62%
gained after the company posted third-quarter earnings of $639 million, or $1.27 per share, 3 cents ahead of Wall Street's consensus view. The company affirmed its expectation to meet the consensus full year earnings estimate of $4.65 a share.

Owing to a strong third-quarter report and a bullish outlook for the remainder of the year, EMC regained half of its losses incurred earlier in the week after announcing plans to acquire Documentum for $1.7 billion in stock. The stock
EMC, -0.68%
leapt almost 4 percent. See full story.

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